Dogfish Head co-founder Sam Calagione shared how the first 149 days of his company’s merger with the Boston Beer Company was progressing during Brewbound’s final Brew Talk meetup of 2019.
Calagione pointed to goals of brand longevity and growth outside Dogfish Head’s homebase of the Mid-Atlantic region as the reasons for forming a business partnership with the maker of Samuel Adams, Truly Hard Seltzer, Twisted Tea and Angry Orchard.
“If you want to be a top 50 brand, you need to really have some level of national capabilities that, frankly, we were pretty anemic in outside of the Mid-Atlantic when we were mom and pop,” Calagione said.
The more than $300 million merger, which closed on July 3, made Dogfish Head co-founders Sam and Mariah Calagione the largest non-institutional stockholders in Boston Beer, other than the company’s founder, Jim Koch.
Calagione also gained a seat on Boston Beer’s board of directors, a spot perhaps he never envisioned for himself when he penned his first book, Brewing Up a Business, in 2005. In that book, he wrote that he would rather swim in a vat of beer than make Dogfish Head a publicly traded company.
“Nine hundred ninety-nine out of 1,000 cases when you go public, you’re legally beheld to prioritizing maximizing shareholder value every quarter and that didn’t seem so interesting to me,” he explained.
What appealed to him about the Boston Beer merger is that Massachusetts-based publicly traded companies can separate their shares into voting and non-voting classes. In the case of Boston Beer, Koch holds all shares in the voting class.
“If you watch how Boston Beer has run their company and their brands, they kind of really put their priorities in a good place and that’s something that gave me a lot of confidence that we were making the right move,” he said.
Additionally, the deal with Boston Beer allowed the Calagiones to buy out the 14.8% share their company had sold to private equity firm LNK Partners in 2015. Calagione explained that Dogfish made that deal at the time to keep the craft brewery competitive at a time when the next phase of growth appeared to require deep-pocketed investment firms, rather than just entrepreneurial brewers.
“There was suddenly a lot of what [market research firm] IRI would define as ‘craft beer’ that were being led by multinational companies or run by private equity companies,” Calagione said. “Mariah and I were like, ‘Oh shit, there’s some really sophisticated, smart business people that are in our industry now navigating through this competitive moment, better bring in some folks that know how to do this.’”
Calagione credited LNK with helping Dogfish Head mature as the industry grew.
“You can be a tasting room, mom-and-pop brewery, and if you’re selling within your own walls and it’s just your family, then just go for it, and do whatever, fly your freak flag in whatever direction you want,” he said. “If you’re committed to the three-tier system and there’s not only your family, but your coworkers relying on you, and you’re asking retailers and distributors to prioritize you versus other brands, you better come correct and be buttoned up and professional with your sales and marketing plan. Be well-differentiated, do your own thing, but be professional and LNK helped us with that.”
As part of this year’s merger, Dogfish Head gained access to Boston Beer’s teams and resources. Calagione estimated that Dogfish Head’s marketing budget will grow by about 500% for 2020, though he doesn’t anticipate spending any of it on television commercials, a medium Boston Beer has traditionally used to advertise its Samuel Adams, Angry Orchard and Twisted Tea brands.
Calagione noted that Dogfish Head will learn national sales programs from established teams at Boston Beer, but will retain full autonomy of its marketing. He added that Dogfish Head’s social media channels have larger fan bases than those of Sam Adams, despite being a much smaller brand in volume.
“What we’re good at is social media, events, and online marketing; we’re just doing that times five, because that’s authentic to our brand,” he said.
In the video below, Calagione pondered how relevant founders’ stories are to new legal-drinking-age consumers, the task ahead with aligning Dogfish Head and Boston Beer’s distribution networks and more.
Watch the entire conversation in the video below.